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Borrowing falls for the first time since 2011

February 2, 2016

The Money Statistics are out and for the first month since December 2011, the amount we owe in mortgages, loans and credit card debt has fallen.

People in the UK owed £1.455 trillion at the end of December 2015, this is down £4.7 billion from November. That’s not much compared to the growth of nearly £200 billion in the last four years, but it is the first time that there has been a significant fall in that period. In the last year the amount people owe increased by £627.09 per UK adult, £194.41 of which is unsecured lending such as credit cards or loans. We also know that savings rates are at a near record low of 4.4% and that around 9.61m (36%) households have no savings, while a further 3.47m (13%) have under £1,500.

Rising debt is not necessarily a bad thing. Credit usually grows when people are feeling better about their finances and falls in times of difficulty and insecurity.

But The Money Charity has been particularly concerned that 82 months of 0.5% Bank of England base rates has allowed debt to build up and deterred saving, leaving many consumers in potentially difficult positions. We would remind borrowers that while repayments may be manageable month-to-month today, you should always have a plan to pay back to sum you have borrowed.

Michelle Highman, Chief Executive of The Money Charity said:

“There is nothing necessarily wrong with borrowing. It is a good way of paying for things you can’t afford up-front like university or your house. But debt becomes a huge problem if we can’t afford the interest and repayments – so we welcome this dip in borrowing and hope it is sustained”

“Assuming that interest rates we pay today will always stay the same sets you up for financial troubles. If rates change, particularly if you have variable interest debt, you will face considerably higher repayments that you may not be able to meet.”

“So it’s especially important to stay in control of your borrowing, and there’s help available at an early stage if you’re in difficulty.”“If your debt feels too much to deal with, there’s free, impartial advice available from charities likeStepChange.”

Other figures in February’s Money Statistics include:

The average interest rate for an instant access savings account – not including bonus interest payments – was 0.38% in December. For a cash ISA, this was 0.68%.

During November 2015 an average of 453 purchases were made in the UK every second using debit and credit cards, based on figures from the UK Cards Association.

In January 2015 the average price of unleaded petrol fell by 2.15ppl (pence per litre) to 102.23ppl.

502,000 18-24 year olds (12.3%) were unemployed between September and November. This was 42,000 (7.7%) fewer than the previous three months.

325,000 people aged over 50 were unemployed between September and November. This is down 1.7% from the previous three months, but up 0.2% on a year earlier.

Get the full picture, and many more fascinating facts about money in the UK in our monthlyMoney Statistics.